Rwanda Fiscal Guide (2014/2015)
Income tax is levied on both companies and individuals. Under the income tax laws, tax is charged on the taxable income accruing worldwide for all residents and on the income of non-residents from sources in Rwanda. An entity is regarded as a resident if it is a company or an association established according to law, or has its place of effective management in Rwanda at any time during that tax period, or is a government company.
An individual is resident in Rwanda, if the individual has a permanent residence, has a habitual abode, is a citizen representing the country abroad, stays in Rwanda for more than 183 days in any 12-month period (either continuously or intermittently) and is resident for the tax period in which the 12 month period ends.
Capital gains tax
There is no separate CGT legislation. However, CGT from business is taxable under the provisions of the Income Tax Act. Capital gains resulting from the sale or cession of commercial immovable property is taxed at a rate of 30%.
Capital gains arising from secondary market transactions on listed securities are exempt from CGT.
Transfer pricing and thin capitalisation rules
There are no specific transfer pricing rules. However, the income tax law provides guidance on transfer pricing. Transactions should take place at arm’s length.
Interest expenses paid to related entities are non-deductible for tax purposes if the debt-to-equity ratio exceeds 4:1. This excludes reserves and retained earnings.
Rwanda has a positive attitude towards foreign private investment and aims to protect and attract foreign investment. Generally, foreign and local investors may engage in any type of business activity. Foreign investors are required to first obtain an investment licence from the Rwanda Development Board (RDB).
- An investment allowance of 40% of the invested amount in new or used assets may be depreciated (excluding motor vehicles that carry less than eight (8) persons, except those exclusively used in a tourist business) is deductible for a registered investor in the first tax period of purchase or of use of such an assets.
- The investment allowance becomes 50% if the registered business is located outside Kigali or falls within the priority sectors determined by the Investment Code of Rwanda.
- If the business profit results in a loss in a tax period, the loss may be deducted from the business profit in the next five (5) tax periods, earlier losses being deducted before later losses.
- A registered investment entity that operates in a Free Trade Zone and foreign companies that have their headquarters in Rwanda pay corporate income tax at the rate of zero per cent (0%).
About David Okwara
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